Josh Schaeffer, PhD
Managing Director, Valuation & HR Advisory Services
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Services for Earnout Valuation
We work with you to do the following:
- Identify the earnout that is part of a business combination or equity compensation
- Identify the circumstances under which the transaction agreement requires consideration to be returned
- Calculate the acquisition-date earnout valuation using best-of-breed modeling techniques
- Assist in developing probabilities of attaining the earnout payoffs
- Determine whether any earnout should be classified as equity, a liability (such as an earnout clause), or an asset
- Remeasure assets and liabilities for each reporting date until the contingency is resolved
- Model the effects on future earnings under a variety of scenarios
- Present the valuation results and core valuation model underpinnings to your external auditor to assist them in performing their audit procedures
Gain greater visibility into the financial implications of earnouts while establishing a robust one-time or recurring valuation process.
A Crash Course on Earnouts
In any M&A situation, the acquiring company wants to avoid paying too much while the target company wants to avoid selling for too little. To bridge the valuation gap and get the deal done, many firms use a contingent consideration, or earnout.
Download this issue brief to learn more about earnouts – what they are, how they work, and the fair value measurement (valuation) implications that affect the upfront and ongoing accounting.
Josh Schaeffer, PhD · 1/29/2016
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